No time to waste for retirement services innovation

Super funds must invest in better products and services to assist retirement-age members now, rather than waiting for clarity around the proposed Comprehensive Income Products for Retirement rules, SuperEd chairman Jeremy Duffield urges.

“The industry has to get on with it,” regardless of what the government eventually does around mandating CIPR (otherwise called MyRetirement) solutions, Duffield says.

He has qualms about the CIPR proposals, arguing that a default one-size-fits-all approach is unsuitable. “With so many variations at retirement, the industry needs to innovate with personalised products and services,” he says.

And advice and other services will be as important as products for the superannuation industry as it develops better solutions for retirees, he warns.

Duffield, who stepped out of retirement to found the online retirement advice provider in 2012, after a 31-year career at Vanguard Australia, says major super funds have been slow to adopt retirement services.

“Australian super funds are just starting to pick up their pace in developing digital advice tools…but we’re really just beginning to get serious about digital advice,” he says. “If you look at trends in the US with 401(k) plans, they’ve had digital advice for a decade.”

He acknowledges a few funds are exceptions to the rule. He calls First State’s acquisition of StatePlus in May 2016, creating a financial advice service at the NSW public-sector employee fund, a “bold move”, and notes that QSuper is also investing in advice and demonstrating innovation with its retirement product offerings.

Overall, however, he maintains the industry has been too slow to adapt to the changing needs of an ageing population.

Duffield says super funds need to engage more with their members to help them navigate the switch from accumulation to retirement accounts. This is when digital advice and services can really come to the fore, as is being demonstrated by a growing number of fintech start-ups.

As an example, he points to Retirement Essentials, an online ‘concierge service’ that helps retired superannuants apply for and keep their age pension entitlements.

Funds also have much to gain by engaging with members before they reach retirement age, Duffield says.

One of SuperEd’s digital offerings to super funds is a forecasting tool designed to help them engage members in the “retirement zone”, those aged about 50, who are beginning to think about their retirement options.

“The real retirement risk zone are the key years leading up to their retirement, but we all wish that people would start dealing with it much earlier, in their 20s, 30s and 40s,’’ he says. “Funds should look at forecasts rather than balances. It would keep people engaged. Forecasting is a big trigger to get engagement.”

Only 2 per cent of Australians engage with their super fund annually, a big problem for the industry.

“Engagement is the big challenge for the super industry,” he says. “People just have trouble identifying with their future selves and they need encouragement. Questions like, ‘How much can I spend?’, ‘How long will I live?’, ‘Will I receive the age pension?’ – these are all big issues that people need help with.”

In the long run, Duffield is optimistic that super funds will innovate, with moves into aged care, helping members’ think about quality of life and how they can use equity in their home to fund retirement.

“We will see more innovation over the next decade, particularly super funds helping members with quality of life,” he predicts

He emphasises the need is great and urgent. With 250,000 people retiring a year, and that figure set to accelerate, money sitting in the pension phase is set to grow at a faster rate than funds in accumulation .

Jeremy Duffield will be a speaker at the upcoming Investment Magazine Post Retirement Conference, to be held at the Amora Hotel Jamison, Sydney, on March 20-21. For more information about the event or to register, please visit www.postretirement.com.au

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Investment Magazine provides in-depth, monthly analysis of trends and developments for all the businesses in which superannuation funds engage‚ including asset allocation, investment manager selection, custody and fund accounting, member administration, group insurance and compliance.